A Big Setback for Health Reform?

Read this quote, from Congressional Budget Office Director Douglas Elmendorf, testifying before the Senate Budget Committee. You are going to hear it repeated often by opponents of the health reform bills that have been unveiled thus far.:

“Dr. Elmendorf, I am going to really put you on the spot, because we are in the middle of this health care debate — but it’s critically important we get this right,” Mr. Conrad said. “Everyone has said, virtually everyone, that bending the cost curve over time is critically important, and one of the key goals of this entire effort. From what you have seen, from the products of the committees that have reported, do you see a successful effort being mounted to bend the long-term cost curve?”

Mr. Elmendorf was unequivocal. “No, Mr. Chairman,” he replied. “In the legislation that has been reported, we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount. And on the contrary, the legislation significantly expands the federal responsibility for health-care costs.”

How damaging is this assessment? It could be devastating. We have talked before about how crucial it is to make the numbers work for health reform. (And Jon Cohn has a must-read piece here.) Under the budget rules, the legislation will be scored not on how it affects health care spending overall, but rather, how it affects the federal bottom line. Harry Reid’s dismissive comment notwithstanding, CBO is the arbiter of this. And as the story notes, arguing with its estimates is about as useful as challenging the balls and strikes called by the umpire in a baseball game.

Which means there may yet be some life in another idea–one that Democrats have declared a loser for them politically:

In his testimony, Mr. Elmendorf said that one step that would contribute in a large way to offsetting costs would be to tax some employer-provided health benefits, which are currently excluded from taxable income.

Mr. Conrad and Senator Max Baucus, Democrat of Montana, the chairman of the Finance Committee, have advocated such a change. But the Finance Committee was forced to scrap its plan to tax some employer-provided benefits because of the objections of President Obama and other Democratic leaders in Congress.

Asked about Mr. Elmendorf’s comments, Mr. Baucus said the White House had tied his hands on the issue.

“Basically, the president is not helping us,” Mr. Baucus said. “That’s making it difficult.”

All of this happened after our deadline for dead-tree TIME this week. But it does speak to the basic premise of the piece I wrote, which is that if Obama wants bills to clear the House and Senate before the August recess, he may have to become more deeply involved in the process.